Baseline characterization is important component of watershed development of rural development and natural resource management strategies in many countries. Hence, the study was designed to; assess and document major biophysical and socio-economic constraints and potentials of Wadego watershed. Firstly, Wadego watershed boundary was delineated and its map was developed based on the preliminary outlet identified with the help of GPS reading. The households for interview were selected randomly from the small householders in the watershed based on proportional to population size. Accordingly, data was collected from 120 sample respondents using various instruments such as: key informant interview using semi-structured checklist, focused group discussion, expert interview, unstructured questionnaire and field observation on bio-physical resources and different concerns of watershed management. Collected data was summarized using descriptive statistics. The result indicated, out of the total 120 sample respondents socio-economic status were; 87.5% of them were male while the rest 12.5% were female, 93% were married, 51% were un educated. The major crops grown in the watershed were Maize, Sorghum, Khat, Teff and others while, Barley and Field Pea were the least grown ones. The result of the survey has indicated 37% uses improved variety, while 64% uses local variety. According to respondents, the slop class of the watershed was 56, 29, and 15% flat, medium and steeply slops respectively. Moreover, soil fertility class was 25%, 54% and 21% low, medium and high respectively in the watershed. Generally, the survey result have characterized and documented bio-physical and socio-economic status as: average land owned half hectare, densely populated, different slope class in the watershed, land shortage, feed problems, presence of soil fertility and erosion problems, climatic problems etc. in the watershed. Accordingly, researchable issues on different prioritized problems concerning to; soil fertility management, soil and water conservation, Agroforestry practice, forage development and forestry practices in the watershed have given prioritization and therefore, adapted and generated technologies nearby research center i.e. Mechara Agricultural Research Center and any concerned research institutions and also development work oriented NGO’S has to intervened the watershed by research development work. Accordingly, intervention areas forwarded are: Creating awareness on climate variability and change and SWC techniques, introducing different biophysical soil and water harvesting technologies, demonstration and awareness creation, Participatory demonstration on different Agroforestry and plantation forestry practices, introducing multipurpose plant species like Bamboo variety in the watershed.